The news regarding China’s rare-earth monopoly continues and companies throughout the globe are approaching expected higher prices with much trepidation. In July, China’s Ministry of Commerce announced plans to further cut export quotas by 72 percent for the second half of 2010. This will reduce foreign shipments of rare-earth minerals to 7,976 metric tons, down from 28,417 tons for the same period last year. In early August, two of China’s largest state-owned rare-earth mining companies announced plans to launch “a new unified pricing system,” essentially price controls, granting China even greater control over the availability and supply of rare-earth minerals. This will inevitably drive up prices around the world.

Accordingly, companies around the globe are getting jittery. “We’ve seen rare-earth prices increase steadily in recent years but until now, we have been able to get the supplies we need. We’re very concerned now about the long-term availability of these materials,” said Peter C. Dent, vice president for business development at Electron Energy, in Landisville, Penn. Electron Energy designs and manufactures high-performance rare-earth magnets and magnet assemblies, specializing in samarium cobalt products.

Molycorp CEO Mark A. Smith is also concerned. “China is doing what it feels it must in order to maximize the value of its resources,” Smith said.

By cutting back on exports yet again, China is securing the supplies it needs to further develop its own high-tech industries and protect Chinese manufacturing jobs. But in Smith’s view, that protection is “clearly troubling” and could lead to near-term rare-earth shortages.

Despite market conditions that were at best somber, Molycorp (MCP) succeeded in raising $394 million through its July IPO at $14/share. The company will use the funds to reopen a rare-earths mine at Mountain Pass, California, making it the largest producer of rare-earth minerals in the world outside of China. The company will start production by the end of the year, and go full scale by 2012.

Good performance by Molycorp is crucial for the United States. China, which supplies 97 percent of the world’s consumption of rare-earth minerals, has cut back export quotas by 40 percent this year. These incredibly expensive metals are crucial for the manufacture of a variety of alternative energy hardware, as well as a number of military applications. Even a small price increase will have economy-wide effects. Since the launch, the stock has risen 11 percent, making it one of the best performing stocks in the market this summer.

EconomyInCrisis.org and several other groups have been working to spread the word and impress upon legislators the critical nature of the problem. According to Jeffery A. Green, president of J.A. Green & Co., an advocacy group working with USMMA, the groups’ efforts are starting to pay off.

“We’re now seeing a lot of political momentum surrounding this issue,” Green said.

For example, at a Washington, D.C., rare-earth mineral conference in March, the Department of Energy’s David B. Sandalow, assistant secretary of energy for policy and international affairs, announced the DOE’s intention to develop its first-ever strategic plan for addressing the role of rare-earth and other strategic materials in clean-energy technologies.

“There’s no reason to panic, but every reason to be smart and serious as we plan for growing global demand for products that contain rare-earth metals,” Sandalow said. DOE later released a public request for information to help develop that plan.

In order for the United States to avoid such problems in the future, we need to develop a department relegated with the task of identifying key technologies and ensuring that the United States has a viable domestic industry for said technologies. If the department determines the absence of production in a critical technology, it would submit an analysis to the proper channels as to why the U.S. lost this ability (or never had it) and provide a set of solutions that would restore the vital industry, which could simply consist of making private companies aware of the situation. By diverting our focus from economic-based planning to technology-based planning, the United States will ensure that vital industries are never lost and that new technologies, which spur better production, will grow in America.

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